With perfect timing, Musk made a couple of taunts at striking UAW workers. His goal is obvious. 
Earnings Per Hour Notes
- The Motor Vehicle hourly rates are for Michigan workers only. The BLS did not have nation-wide numbers.
- The data series for construction workers and production workers starts in March of 2006 so that is where I started the chart.
Understanding the Chart
The chart does not tell the full story. UAW workers get far more benefits and huge bonuses that are not factored into hourly earnings.
UAW workers also get annual bonuses that are not factored in.
The motor vehicle decline from $28.35 per hour to $20.65 per hour stems from UAW renegotiations after GM and Chrysler went bankrupt.
To survive at all, the UAW granted concessions and put in a tiered wage structure where new employees were paid less. Factor in retirements and hourly wages fell.
Total UAW Unit Labor Costs vs Tesla
- Big Three: Analysts estimate $66 an hour
- Tesla: Roughly $45 at Tesla
- UAW Demands: Meeting Fain’s initial demands would boost costs to $136 according to Wells Fargo analysts.
Tesla does not pay more in hourly wages, but via stock options, Musk has made millionaires out of many workers.
Stock options are not a company expense. Stock options come out out of shareholders pockets.
Whatever the UAW Strike Outcome, Elon Musk Has Already Won
“Any wage increase further advances Tesla’s already tremendous cost advantage in EVs over its older U.S. peers, which are contending with generations of legacy expenses while trying to steer a costly transition to electric from gas-powered vehicles.”
The Wall Street Journal comments Whatever the UAW Strike Outcome, Elon Musk Has Already Won
Musk won before the strike began early Friday. He won before negotiations started two months ago. From the get-go, General Motors, Ford Motor, and Chrysler parent Stellantis were expected to spend more on wages because of the union’s pressure. The question is just how much of an increase, and so far their offers haven’t pleased the union, igniting this past week’s work stoppage.
Fain this past week sounded annoyed when asked about Tesla’s cost advantage.
“Competition is code word for race to the bottom, and I’m not concerned about Elon Musk building more rocket ships so he can fly in outer space and stuff,” Fain told CNBC on-air Wednesday. “Our concern is working-class people need their share of economic justice in this world.”
Economic Justice
In the name of “economic justice” Fain would bankrupt the Big 3 again.
Here’s the math: $136 * 32 hours per week * 52 weeks = $226,304. Note the UAW demand for a 32 hour workweek. At a 40-hour workweek, pay would be $282,880.
Sorry guys, that will never fly. Whatever does fly, plays into Musks hands.
Musk has suggested that employee stock options make his factory workers the highest compensated in the industry, saying “quite a few” line workers have become “millionaires over the years from company stock grants.”
At Tesla, the average pay for a manufacturing technician can range from $23 to $32 an hour, according to estimates by Glassdoor. Tesla advertises factory jobs in California with expected pay ranging from $24 to $67 an hour plus cash and stock awards and other benefits.
Tweet of the Day
Perfectly Timed Taunt
“Tesla and SpaceX factories have a great vibe. We encourage playing music and having some fun. Very important for people to look forward to coming to work! We pay more than the UAW btw, but performance expectations are also higher. Quite a few of our factory techs who work on the line have become millionaires over the years from company stock grants.”
Tesla does not pay more than the UAW, at least in hourly pay. But workers who have been at Tesla for a long time have made a killing on options with any kind of reasonable timing.
The taunt at the UAW is aimed at encouraging the UAW to not settle quickly. It has a decent chance of working.
Fain has already responded about economic fairness and the race to the bottom.
Automakers Announce Layoffs
If workers have little to do because of a part shortage by a strike, the only reasonable thing to do is announce layoffs.
This has a good chance of escalating rapidly.
Reflections on What Sucks
Inflation is what sucks and there is plenty of blame to spread including the Fed, Congress, and three stimulus packages.
But Biden’s Big EV push is behind much of this recent angst.
It takes fewer hours to build an EV. Biden is pushing them like mad despite the fact that consumers do not want them because the infrastructure isn’t in place. Ironically, increased mileage standards have negative benefits according to a government study (at long last getting something right).
So now the union wants a 32-hour workweek with a 36 percent raise (down from 40 percent) more benefits, and ability to strike over plant closures despite the fact it takes fewer workers to produce an EV.
There is no one other than Biden to blame for this latest round of economic and environmental madness.
This union battle was created by Biden, the EPA, the Labor Relations Board and other administration regulatory clowns.
Unprecedented UAW Strike, Where’s it Headed? Keep Em Guessing Says Fain
I discussed winners and losers in Unprecedented UAW Strike, Where’s it Headed? Keep Em Guessing Says Fain
Time Will Tell the Winner
There are two definitions of win, short-to-midterm and long term.
The long term view is easier to state. GM and Chrysler (now Stellantis) already went bankrupt once over untenable wages and benefits. It could easily happen again. And If the bondholders (not that I feel much sympathy for them) were not totally screwed in the last settlement, it would have been much worse for the unions.
Short term, I suspect everyone loses, but Fain and the UAW will temporarily cheer.
Record profits said Biden. Lovely. Then what? Then a preposterous deal, then bankruptcy?
The above discussion is from the point of view of the Big 3 vs the UAW. I left off a winner, Elon Musk.
Tesla benefits no matter what happens because the Big 3 costs are certain to rise.
The big loser is the consumer who will pay more for cars.
Meanwhile let’s discuss the benefits of improved gas mile standards.
National Highway Traffic Safety Administration Analysis of Gasoline Standards
The National Highway Traffic Safety Administration NHTSA did an impact assessment of 4 fuel standard proposals and compared them to the cost of doing nothing. Guess what.
Buried deep on Page 56,342 of volume 88 of the Federal Register, the agency makes this concession about its latest proposed rules: “Net benefits for passenger cars remain negative across alternatives.” In plain English, this means that mandating ever-more-stringent fuel economy for passenger cars will harm society.
Through 2040, the total reduction of greenhouse gas emissions from passenger cars and light trucks would be a mere 2.01 percent less vs doing nothing at all with emission standards!
The NHTSA also considers impacts on the economy including “consumer cost, national balance of payments, environmental, and foreign policy implications.”
Here is the NHTSA’s bottom line: “Net benefits for passenger cars remain negative across alternatives” vs doing nothing at all.
The Shocking Truth About Biden’s Proposed Energy Fuel Standards
For discussion, please see The Shocking Truth About Biden’s Proposed Energy Fuel Standards
Regardless of how we assess the winners and losers in the UAW battle, over the short and long haul we all lose from the push to pay more for the regulatory and environmental madness of this administration.
I don’t know if anyone mentioned the other, major car makers other than Tesla, such as Toyota, Nissan, VW, Honda and others, which operate in non-union states in the mid-Atlantic and the South. The UAW demands border on ridiculous. I have an MBA and I can tell you that there are only 2 outcomes to conceding to the UAW’s farcical demands: 1) The big 3 go bankrupt 2) The prices of their vehicles double to cover labor costs making them uncompetitive with Tesla and other non-union car makers. The Ford F-150, best selling vehicle period, already sells in the 50K to 60K range for the gas powered version. Is Ford going to double the price to cover labor costs if it agrees to the UAW’s demands? Furthermore, Ford has already had to substantially increase the price of the electric F-150s, for which demand has plummeted. I am all for EVs, but the infrastructure is not in place. I keep reading horror stories about broken chargers or chargers that don’t charge at the rate they are supposed to. It seems like these charger companies just threw those chargers out there and never checked on them. I recently read an article where the Biden administration is thinking of incentivizing gas stations to install electric chargers. Brilliant. People go to gas stations/convenience stores for gas and snacks, let them do the same with fast chargers. The EV revolution is more of an evolution. It will be slower and more painful than policy makers originally thought, but it is inevitable and it will happen. Gas vehicles are going to become dinosaurs just like the fossil fuels they burn. Cheers.
I don’t know about your MBA but the labor percentage in the total cost of an automobile is around 20% on the higher end. Even if wages went up 50% that wouldn’t cause the price of a vehicle to anywhere near double. Do the math.
The President of the UAW is a commie boleshevik. I listened to him for an hour on his podcast. At one point he held up a Democrat Party booklet from the 1960’s and called Trump a con artist…meh. I don’t even like Trump but Trump is not his problem. It is the Democrat Party.
The “big 3” need to hire illegal aliens the uniparty allow in and be done with the UAW once and for all. Want high wages then do something that renders high wages other than screwing on parts and watching screens. Go EARN a degree in engineering if you want the big money. Sick of these people demanding more than their worth. It’s like a bunch of NCO’s in the military saying they want officer pay. NO. They are not victims. They are low skill labor. Nothing more.
yes. the Ds are commie bolsheviks. the Rs are fascist nazis. they both love the BIG GOV apparatus. ole ronnie raygun scammed 2 generations of nit wits and sold them a free lunch. tripled the debt, doubled the military. pro tip, the VA is pure commie apparatus. the nitwits in pax dumbfuckistan have me surrounded. i’m waving the white flag, properly above the amerikan and pride flag, but below my sacred sicilian flag. that thing is bad ass.
EVs require fewer assembly parts, and what is done can be assembled by sub-contractors or robotized. Comparing number of assembly workers and wages is akin to comparing apples and oranges. The UAW is fighting wind mills, and will be become irrelevant. That doesn’t make EVs cheaper, since labor is just one price component.
the modern manufacturing plant in rich world needs men(and not too many) with college, 2 years at least. the old days of the village idiot dropping out of HS and getting a decent job on the line are long long long over. those serfs will be your busboy or uber driver or construction unskilled laborer humping stuff.
This is part of the chaos is changing out of FFs to RE. Opec has its head in a vise as the world transitions to clean energy and electrification. there is more than one set of people paniced from this. The auto industry is transitioning at the same time with declarations of no production of ICE vehicles by a certain date. This isn’t guaranteed to be smooth. Some legacy automakers just may fail in this transtion.
link to interestingengineering.com
OPEC warns of ‘chaos’ brought on by peak fossil fuel claims
The narrative that peak fossil fuel demand is near is dangerous, claims the organization.
If the near future is for EVs, why the oil is at 100$?
The number of airline flights powered by electric airplanes is?
How many electric long haul trucks did you pass on the road this week?
How many electric cruise ships are sailing today?
also all our computers and cloud farms…….run on much petroleum and coal…….
And Africa and India and China growing per capita energy use
How will this be different in the 2030s and 2040s?
Most gas cars won’t be produced anymore.
Tesla Semis will be abundant along with other manufacturers.
Electric powered flight will take over short flight trips.
wet dream
That’s an interesting question. Has the US fracking peaked with interest rates at 5%, fracking doesn’t enjoy unlimited free money fleeing ZIRP.
The individual interests of high paid management helped to spur on the union to getting what they believe to be their fare share. If we are to stay financially efficient, management needs to see that they are also part of the problem. If management can agree to cut their own wages for the good of the company, then working for the good of the whole can prevail. Too bad it doesn’t work that way.
Our individual interests balancing out with the good of the whole come into conflict.
1) On the day of the strike TSLA closed below Thurs Sept 14 high, under July 19/20
gap.
2) AAPL and TSLA peaked in 2021. AAPL made a new all time high, TSLA didn’t.
3) Inflation is transitory. It rose from 0.1% to 9.1%, dropped to 3% and retraces a little. During the next recession inflation might be negative. We are on the cusp of recession. UAW and mgt should sign a short term contract, compensating UAW for some of the previous losses, but not for future inflation, b/c we never know.
4) If we enter recession demand for TSLA will drop. Ilan options might become worthless.
pro tip. inflation is cumulative. you would need outright deflation for many years to go back to currency power of 5 and 10 and 40 years ago. i’m shocked how many men have not a clue. sheep to the slaughter. serfs.
Inflation is permanent always has been
No doubt the UAW contributed to GM bankruptcy I remember some of the work and layoff rules were insane. Basically paying workers 95% of their pay while on layoff among a lot of other things. However management was also incompetent and probably contributed a great deal to their insolvency. My wife worked at GM hq before we had children and the inefficiencies were significant. Also recall Ross Perot pointing out GM managerial incompetence and was basically swept out the door for exposing the truth. I am hoping from the white collar standpoint they learned their lessons and I hope they are smart enough to stand their ground against outrageous union demands. The only thing I do agree on is that the 2 tiered wage system needs to be fixed. It takes way to long about 4 years for a new hire to get up to full union pay scale.
I sympathize with the UAW workers losing out to inflation. However the real solution to the cost of living is to have affordable housing and affordable health care. Then a reasonable wage will provide a reasonable standard of living and the US may be able to compete in manufacturing. Neither party has promoted any policies that would come close to accomplishing either. Too much ideological opposition from both sides that only favor either market based (carrot) or regulation (stick) based solutions. A combination of both is needed.
Regarding losing out to inflation, you have no one to blame than the government. From welfare benefits, illegal immigrants and their welfare bennies, MIC (the 900 trilloin dollar yearly gorilla that many don’t talk about), along with other waste it’s no wonder the dollar is losing buying power. The printer just brrr’s away.
These employees should take what they can get within reason or they’ll be out of a job. 32 hours a week, huh? No wonder China is kicking out ass.
How do you explain the increasing inequality of income in the US? Is that because US workers are making such phenomenal wages? Aren’t Chinese workers making more than Vietnamese workers, who make more than Indian workers, who make more than Sudanese workers, who make more than Haitian workers? Shouldn’t we all make the wages of Haitian workers who must really be “kicking ass”? Does this mean that the magnificent Elon Musk is doing poorly? Poor Elon, and poor little capitalists who get bailed out by the government, get subsidies and tax cuts, but still need help from the greedy workers who just want a raise so they can get to the real wage they made 25 years ago.
You want affordable housing? Then stop thinking of housing as an “investment”!
Remove all tax breaks associated with housing, including interest deductions and capital gains exclusions on sales. Also eliminate corporate ownership & rental of housing. Finally, eliminate foreign ownership of housing.
Chances of the above occurring? ZERO! Existing beneficiaries and stakeholders would not agree.
The UAW needs to be charged with antitrust and monopoly behavior. Their actions reduce labor competition, drive up consumer prices, disrupt trade and hurt taxpayer’s chances of the repayment of Big 3 loans from the US government. The only technicality is the UAW is not a corporation.
This is one of the fallouts from energy transition. How do you do a reset on older institutions with a history that bogs them down? This seems to show again that our jobs will go overseas. I’m sure the Asian electric cars are coming soon. It appears to me, we will have trouble again competing against low labor prices.
Except that they aren’t going overseas. They are just going to right to work states (non-union). Other than the big 3, all the other auto makers build plenty of cars in the USA. They just do it in southern states that don’t have unions.
It’s not just Telsa that’s going to win from this strike. It’s Toyota, Honda, KIA, BMW and so on.
The reason the big 3 made record profits is because of Covid. That created chip shortages so auto makers built only the most profitable vehicles. They quickly realized that was the way to go so the big 3 abandoned non profitable / low profit vehicles. That’s why they stopped making cars and now only make SUVs and trucks. Once this strike settles, more vehicles will become unprofitable and so more models will have to be abandoned which will in turn close plants and shrink the size of the UAW further. It’s a clear death spiral for the UAW / big 3. Of course the big 3 have a few plants in southern states and I suspect those will survive because of lower costs and that’s where they’ll ultimately make the final few models that they sell (essentially just trucks and big SUV’s).
Its possible to see a death spiral in this. Good management will get them into sustainability. We will see if that happens.
Maybe the solution is $66 per plus stock options?
BTW. Option grants are reported in the P&L. Agree that they do dilute stockholders.
Thanks, Mish, great post as always – Post Translation: It’s good to be the grifting green car manufacturer (Tesla) that has the Government Gang Green Gun poked in the back of your competitors. Oh, and not to mention having the slobbering supine automotive press fanboys pushing your product uncritically while your competitor’s vehicles, amazing clean and efficient, are re-defined as dirty. What a fraud from top to bottom. Oh, and let’s not forget the essential DOD grift backing of Musk’s “encircle the world with SkyNet satellites….but we’ll tell everyone it’s about helping the poor schmoes in the outback get internet”.
Toot toot!
Just like Bezo, Apple, Google, Microsoft etc. Elon has .guv black budget $ shoveled in the back door.
Sounds like you should be loading up on Tesla stock, if the fix is in!
Your comment sums up the situation beautifully. We’re doomed, but might as well laugh about the ironies. Thanks.
Take your tinfoil FUD hat off and maybe you’ll be able to formulate a reasonable thought in that smooth brain of yours.